WTI closed up $3.69 to $49.02 following the OPEC deal. Our blog last night was written as of 7:30pm mountain time with the market moving more to a no deal view believing Saudi Arabia was likely to do like they did at Doha in the spring and pull out. It looks like Saudi Arabia blinked. The momentum shifted to an OPEC deal this morning, when going into the ministers meeting, Saudi Arabia Oil Minister al Falih was discussing major OPEC cuts and said “It will mean that we (Saudi) take a big cut and a big hit from our current production and from our forecast for 2017”.

What are the key elements of the deal?

OPEC issued an agreement press release, but there was added color in the press conference Q&A, as well as the separate press releases to close and open the meetings.

Part 6: Deal Or No Deal, What Is The Impact To The Current Oil Oversupply?

Oil closed down $1.85 today to close at $45.23 as the market moved mostly into the camp of no deal believing that the major players (Saudi Arabia, Iran, Iraq and Russia) are not going to close the gap and reach a deal. If anything, the reports suggest the gap could be widening. We are writing this blog as of 7:30pm mountain time.

We started this blog series “Countdown To OPEC’s Nov 30 Meeting” at the beginning of Nov because we expected to see a month of chatter, oil price volatility, and knowing that the track record of OPEC quota cuts suggested a deal shouldn’t be expected until the last minute. This provided an excellent window in Nov to write our blog series.

We started this blog series “Countdown To OPEC’s Nov 30 Meeting” at the beginning of Nov because we expected to see chatter and chatter impacting oil prices. Up until last week, the oil tone was weak and in line with our expectations for weak oil prices until any last minute deal or clearer indications that the major parties (ie. Iran, Iraq, Saudi Arabia) are moving to a deal. Plus we expected that the prior track record of OPEC quota cuts suggested a deal shouldn’t be expected until the last minute.

However, the tone turned positive on Saturday night and was primarily driven by Shana’s Sat Nov 19 story “OPEC Highly Probable to Reach Accord on Freeze Plan: Iran”. [LINK] The opening line of the Shana story was clear – “Iranian Minister of Petroleum Bijan Zangeneh said: “It is highly probable that oil and energy ministers of the member countries of Organization of Petroleum Exporting Countries (OPEC) will reach an agreement [on production freeze plan] in the November 30 meeting.” It was important that the story came from Shana, the news agency for Iran’s oil ministry. That positive tone has continued with reports from OPEC’s High Level Committee in Vienna on Mon/Tues that OPEC members are reaching an agreement to hit the lower end of the Algiers target cut of 32.5 to 33.0 million b/d.

Part 4: Oil Growth Returning To US At $50 Oil, But Not To Most Non-OPEC Producers

Part 3 of our blog series on the Countdown to OPEC’s Nov 30 meeting was posted yesterday and focused on Iran and why it may well be the best possible time for Saudi Arabia to grit their teeth and accommodate Iran.

Another reason why it is timely for OPEC to do their deal now is that they should now have confidence that most non-OPEC oil production isn’t likely to come back at $50 oil. There isn’t much more to gain by having oil at $40 as opposed to $50. So why not get their deal done and move oil back to base for oil at $50.

Oil prices have been weak on increasing sentiment that OPEC will not be successful at its Nov 30 meeting to reach a quota agreement to get down to the Algiers target of 32.5 to 33.0 million b/d. [LINK] A deal was made harder with OPEC Oct oil production at 34.6 million b/d, compared to 33.175 million b/d assumed at Algiers. Q4 production increases for Iran, Libya and Nigeria were expected and are in line with our Nov 7 blog “Countdown To OPEC’s Nov 30 Meeting. Part 2: Increasing Challenge To Get Down To 32.5 Mmb/d”.

Libya, Nigeria and Iraq all need to be dealt with to get to the Nov 30 deal. The reality is that Iran has been the major challenge for Saudi Arabia and OPEC to get to a Nov 30 deal. Iran has been firm to want to get back to pre-sanctions levels, which at least are now is in sight, and not much higher than current Oct oil production.

What a wild ride for markets and it sounds like some major trading profits were made since last night ie. Bloomberg’s reporting of Carl Icahn leaving Trump’s victory party to invest $1 billion. [LINK] . As the momentum shifted to Trump, US equity futures were getting creamed and, around midnight, US S&P futures were halted as they hit market limit down of 5%. By 3am, when it became President-elect Trump, US S&P futures were only down 2.5%, and then 7 hours later, the S&P opened up.

It also means that the time has now passed to keep ignoring Trump and to try to figure out what it means to oil and gas and markets. That is the challenge. There wasn’t the normal level of detail over the past several months. But we can piece together the key energy specifics from the key items: (i) His official “An America First Energy Plan”, which had 7 broad statements on his vision for energy. [LINK] (ii) His May 26 speech to the oil and gas sector on his “An America First Energy Plan”. [LINK] and (iii) His Oct 22 Gettysburg speech “Donald J. Trump Contract With The American Voter”. [LINK]

The countdown to OPEC’s Nov 30 meeting is on. To put it bluntly, OPEC is now faced with a “put up or shut up” decision at Nov 30, and OPEC’s decision (make a quota deal or no deal) will define oil markets thru 2018.

Oil prices continue to trade on chatter and sentiment if OPEC can or cannot reach a quota agreement at its Nov 30 meeting to get OPEC production to 32.5 to 33.0 mmb/d, as was announced in Algiers on Sept 28. [LINK]

Two game changing coin flips in Nov 2016 have the potential to shape markets thru 2018. First up is the Nov 8 coin flip of Clinton or Trump. And then the Nov 30 coin flip of OPEC quota deal or no deal decision. Things could change, but right now both are coin flips. For Nov 8, there has been a huge ramp up in the respective sides promoting the reasons why the other side is wrong and they are right. And the momentum for Clinton or Trump changes depending on the headlines. Chatter is headlines, and unfortunately push the fundamentals (policies) to the background.

For OPEC Nov 30, the respective deal or no deal sides started their arguments immediately post the original Algiers Sept 28 OPEC announcement for a target OPEC oil production of 32.5 million b/d. We are now 4 weeks away from Nov 30, so expect these arguments to intensity, just as is being seen in the run up to the Nov 8 elections. And as these arguments (some supported by data, some just by chatter) come forward, oil prices will move one way or another.